Summary of a small disaster

TraderZones · Feb 26, 2009

Quote from travis:

Yeah, I realize I can't expect to create a system that has no drawdown, so I do need money management. Maybe I lack the skills and the energy, so I looked for shortcuts.

It makes sense. Non-system traders as I know them, lose pretty quickly all their money. The others, with systems, but not the other tools (like risk management), don't lose everything and might even make money in the short run. Then - it happened to me twice - all of a sudden, they lose everything they made.

Yeah, capital preservation. I agree. My situation was having 20 systems, all so so (60% of wins), and probably with 200,000, I would have made it. But starting with 4k as I did, I was lucky enough to make money for a few months. I think they all went wrong at once, just like they all were making money at once. I thought they were different, but maybe not.

But hey, I am far from being a so-called "pro". I am already very happy that I am not losing all of my money everything with discretionary trading as I was doing until very recently. I hope one day to bring my system trading further, to include the Risk of Ruin. For now I am happy that I achieved some success, even if it didn't last very long. All that matters is that I keep getting better. I can't get perfect overnight.

Sooner or later I will manage to get rid of my addiction and quit discretionary trading altogether (I don't know when - I can't promise tomorrow, because I've said many times already). Sooner or later I'll have enough capital and a good enough system that won't bring me back to zero every once in a while. Or I'll learn to take less risks. For sure I am bad at math, and at using formulas so I am gonna keep it as simple as possible.

Although it is not the only thing you need, everyone should start paper trading their systems. If it does not work on paper, it will NEVER work with real money.

Then you graduate to small amounts of money, and get to the point where you regularly make money.

Then you can start ratcheting up. But greed and impatience kill many.

A large account does not guarantee success, because many traders ramp up their leverage

greysquirrel · Feb 26, 2009

In the past I used this program called market system analyzer to compute the correlations in a basket of systems. Works decent and you can monitor equity curves as well. My systems run about the same edge as yours basically 60 percent with equal target and stop. Good luck

travis · Feb 27, 2009

lpchad, you are right. What I do think is that the majority of traders lose, that is widely known, and since the majority of traders are also discretionary traders, we can assume that the majority of discretionary traders lose.

----------

TraderZones, paper trading? As I said, my systems definitely do work for a few months, so after seeing that they work for a few months I trade them. I can't wait all life. Plus all I lose is 4k each time I am wrong. Because that is the money I start with. To me anticipating financial freedom by 6 months is worth the risk of financial ruin.

"greed and impatience kill many" - yeah, I have a lot of greed and that is what made me do discretionary trading. I don't know if we can call it an addiction - it's the greed that motivated me to do it, hoping to make even more money, but it never worked for me. I win 2 times out of 3, but the 3 time I lose more than I made the other times (no stoploss).

"ramp up their leverage" - yeah, same reason - greed and impatience.

Well, I see it this way. Once I'll have over 20 working systems, I'll let the best ones run, and once so many systems run, I won't feel like helping them out with my discretionary trading. Look, I know I am not doing things perfectly, but I am trying my best. If I get to a point where I doing something that will not work for sure, but will most likely work, then I'll be happy. After this second "ruin", I learned one more thing - even being at 13k of capital and using only my systems does not guarantee I won't get back to zero.

------------

greysquirrel, thanks, good luck to you, too. I am glad to know that 60% wins can work. Regarding the software, I am not good enough to get that complicated. I gotta keep it even simpler. I can only go as far as Profit ratio and win ratio. If I take it any further, my reasoning won't be as reliable. Like for example I don't use the RSI, because I don't really understand what it is. The Range I do use, because it's clear to me what it is.